Indian government bonds are
set for a choppy trading session on Friday as a fresh debt
supply and concerns of rate hikes will be in focus, but rising
bets of a record surplus transfer from the central bank will
limit any major selloff.
The benchmark 6.48 per cent 2035 bond yield is
expected to move in the 7.07 per cent – 7.14 per cent range, a private bank trader
said. It had ended at 7.1134 per cent on Thursday. Bond prices move
inversely to yields.
New Delhi will aim to raise ₹32,000 crore ($3.33
billion) through the sale of three-year, seven-year and 30-year
bonds later in the day.
“We are in for another push-and-pull trading session for
bonds, as traders are expected to take conflicting positions
amid contrasting news flow,” the trader said.
Bond yields surged on Thursday after Bloomberg News reported
that the Reserve Bank of India is considering all available
options to stabilize the rupee, including raising interest
rates.
Economists at Standard Chartered said the RBI is likely to
start hiking rates as early as June, citing increasing inflation
risks from elevated crude prices triggered by the West Asia
war. They expect 25 basis-point hikes each in June and August.
Meanwhile, oil prices and Treasury yields remained largely
unchanged on Friday, with the benchmark Brent crude contract at
$105 per barrel and the 10-year yield around 4.57 per cent.
Investors doubted the prospects of a breakthrough in
US-Iran peace talks, with the two sides still at loggerheads
on Tehran’s uranium stockpile and control of the Strait of
Hormuz.
The major focus for the day remains on the RBI’s surplus
transfer, likely to hit yet another record. A Reuters poll
predicted a dividend of ₹2.9 lakh crore to ₹3.2 kakh crore, which could provide significant fiscal support to the
government.
RATES
India’s overnight index swap rates will remain volatile
after surging on Thursday.
The one-year swap ended 15 bps higher at
6.36 per cent, while the two-year rate closed at 6.5550 per cent. The five-year
rate settled at 6.85 per cent.
($1 = 96.2000 Indian rupees)